This analysis provides a clearer understanding of the complex relationship between the NNPC, Dangote Refinery, and other industry players. The NNPC’s inefficiencies and the government’s attempts to maintain control over the fuel market, even at the expense of consumer interests, reflect deeper systemic issues within Nigeria’s oil sector.
The ongoing power struggle between the Nigerian Federal Government (FG), the Nigerian National Petroleum Corporation (NNPC), and Dangote Refinery can be summarized in several key points:
1. NNPC’s Refining Incompetence
The NNPC has long struggled with refining crude oil domestically. Despite Nigeria being a leading crude oil producer, the country lacks the capacity to refine its oil efficiently. As a result, NNPC relies on importing refined petroleum products, especially Premium Motor Spirit (PMS or petrol). This dependence on imports has consistently driven fuel prices higher for Nigerian consumers.
2. Dangote Refinery’s Competitive Edge
Dangote Refinery, the largest single-train refinery in the world, has the capacity to process 650,000 barrels of crude oil daily. Once fully operational, it could significantly undercut NNPC’s imported refined product pricing, with estimates suggesting prices below ₦600 per liter for PMS. This price point would be a major relief for Nigerian consumers, but it poses a direct threat to NNPC’s operations and the profits of those benefitting from Nigeria’s import-reliant fuel system.
3. NNPC’s Market Risk
If Dangote’s products sell at a lower price than NNPC’s imported fuel (which could exceed ₦600 per liter), no marketer would purchase from NNPC at a higher cost. This would, in effect, make NNPC’s fuel business unsustainable, potentially leading to its collapse in the domestic market.
4. Oando’s Acquisitions and NNPC’s Vested Interests
Recently, Oando acquired significant assets from Agip, further consolidating its control in the oil sector. Additionally, Oando’s OVH Energy is now the sole controller of NNPC’s retail operations. This consolidation of power suggests that vested interests, especially within NNPC, are at stake, complicating the power dynamics. Oando’s rise may have influenced NNPC’s decisions in trying to maintain control over the market.
5. Government Tactics Against Dangote
To protect NNPC’s interests, the government allegedly employed several tactics to pressure Dangote Refinery:
Accusations of FX laundering: The government raided Dangote Refinery on accusations of laundering foreign exchange.
Denial of crude supply: NNPC allegedly withheld crude oil from Dangote’s refinery, forcing him to source crude from international markets like the U.S., adding to his operational costs.
Allegations of substandard products: Further claims surfaced that Dangote’s refined products did not meet quality standards, another attempt to cripple the refinery’s operations.
6. Dangote’s Retaliation and Exposures
When the pressure became overwhelming, Dangote reportedly began revealing inside information, such as crude round-tripping schemes and other questionable activities within the sector, including the Malta refinery incident. These exposures shed light on systemic issues within the government and NNPC operations.
7. Government Restricting Dangote’s Pricing Transparency
Dangote Refinery was allegedly forced by the government not to disclose the pricing of its products to the public. This opacity benefits the NNPC, preventing market competition and shielding the corporation from consumer backlash.
8. Monopoly on Off-Taking PMS
The government is also reportedly forcing Dangote Refinery to sell all its refined PMS solely to the NNPC, preventing direct sales to marketers. This move effectively cages Dangote, allowing NNPC to control the supply and maintain dominance in the market despite its inefficiencies.
9. Price Manipulation Ahead of Dangote’s Launch
In a preemptive move, the government raised PMS prices just days before Dangote Refinery was expected to release its products. This strategy would push Dangote to sell at higher prices, giving NNPC a buffer to sell its imported products at similar rates, profiting from the disparity.
10. Foreign Exchange Dispute
NNPC also failed to uphold an agreement to sell crude to Dangote Refinery in Naira. Instead, Dangote was forced to buy crude in dollars, a situation that contradicts the expected local currency transactions. In response, Dangote threatened to sell his refined products internationally in dollars, leading to ongoing disputes and delays in the refinery’s output.
11. Unresolved Discrepancies
As of now, many of the underlying issues between Dangote Refinery and the FG/NNPC remain unresolved. This includes discrepancies in pricing, product off-take agreements, and the larger question of how long NNPC can continue to operate in this manner.
The Bigger Picture
The NNPC and FG have not been transparent in their dealings, consistently failing to communicate the truth to Nigerians. The question of why NNPC cannot operate efficiently despite decades of oil wealth remains unanswered. The struggle between NNPC’s incompetence and Dangote’s potential success could significantly alter the future of fuel pricing and availability in Nigeria. As these power dynamics unfold, Nigerians may be in for some shocking revelations in the coming days.
Hon. Chimazuru Nnadi-Oforgu
“Duruebube Uzii na Abosi”
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